Toromont Industries Ltd.

Good morning. Today is Tuesday, November 5th, 2024. Welcome to the Torremont Industries Limited Third Quarter 2024 Results Conference Call. Please be advised that this call is being recorded and all lines have been placed on mute to prevent any background noise. Your host for today will be Mr. John Doolittle, Executive Vice President and Chief Financial Officer. Please go ahead, Mr. Doolittle.

Thank you, Elvis. Good morning, everyone. Thanks a lot for joining us today to discuss Torremont's third quarter results, and also on the call with me this morning is Mike McMillan, President and Chief Executive Officer. Mike and I will be referring to the presentation that is available on our website, and to start, I would like you to refer to slide two, which contains our advisory regarding forward-looking information and statements. After our prepared remarks, we'd be more than happy to answer questions, and let's begin by moving to slide three, and I'll pass it over to Mike.

Great. Thanks very much, John. Good morning, everyone. Thanks for joining us. Before we get started, we are extremely pleased to welcome Aave Lethbridge and Paramita Das to our Board of Directors. Aave and Paramita bring substantial business acumen and expertise in their respective fields and are important additions that expand the depth and breadth of our team. In addition to our package, On slide three, we have provided a brief summary of the respective backgrounds in our quarterly news release as well. With these additions, the company's board of directors will consist of 11 members, of whom 10 are independent. Please join us in welcoming Ave and Paramita. Now let's get started and move to slide four. On September 9, 2024, the company completed the acquisition of the business and net operating assets of Tri-City Equipment Rentals. Tri-City is an industry leader in heavy equipment rentals with operations in southwestern Ontario. The acquisition expands Torremont Cat's heavy rents business to better serve our customer base and aligns with our positive longer-term view of the rental market. We are very pleased to welcome the Tri-City team to the Torremont family. As we move to slide five, I'd like to note that John and I will be commenting largely on a continuing operations basis. which excludes the results of AgWest as it was sold in Q2 of 2023. We exclude AgWest as we believe this provides a better basis for comparability. Results for the third quarter of 2024 reflect good growth in revenue across most market segments as well as continued execution against a strong order backlog with revenue up 14% and net income lower by 10% from Q3 2023. Margins and bottom line results have been dampened as expected with the more normalized product availability against a strong comparator reflective of tighter market conditions in play last year. The equipment group executed well with solid new equipment deliveries. Rental markets, specifically light equipment, picked up in the quarter while used equipment sales declined primarily due to lower rental dispositions. Product support activity levels remain healthy, and we continue to increase technician headcount. Improving equipment availability, good bookings over the first nine months of the year, and a healthy opening order backlog remain supportive. Simcoe continues to deliver solid results for the third quarter, driven by good execution in both Canada and the U.S., coupled with healthy activity levels. Package revenue in the quarter reflects the advancement of construction schedules, in the execution of the strong order backlog. Product support activity continued to demonstrate strong growth in Canada, supported by a larger technician workforce, however, was slightly dampened by the U.S. region. Our financial position remains strong as we continue to invest in the business in Q3 on a year-to-date basis through working capital and the Tri-City acquisition noted earlier. Although residential related activities are experiencing a slower part of the business cycle, this is partly offset by strong equipment deliveries in mining related to mine development and expansion in our territory. As we look out over the next cycle, we anticipate a more balanced revenue mix with a focus on product support as recent equipment deliveries are utilized. Across the organization, We continue to focus on our long-term investment strategies and remain committed to our operating disciplines, driving our aftermarket strategies, and delivering customer solutions today and for the future. Our strong financial position and order backlog position as well. On slide six, I'd like to touch on a few key financial highlights. Investment in non-cash working capital increased 29% versus a year ago. We are comfortable with this increase as it was mainly driven by higher inventory levels and account receivable balances reflective of the higher new equipment sales levels and normalizing supply conditions. Inventory levels are higher than the prior year, driven by a number of factors, including delivery timing, inflation, foreign exchange on U.S. source supplies, improving availability through the supply chain, seasonality, and general activity levels. Accounts receivable increased in light of the higher revenue in the quarter. Day sales outstanding were unchanged from this time last year. Our team continues to closely manage the aging of our receivables and monitor credit levels and metrics. We ended the third quarter with ample liquidity, including cash of $671 million and an additional $461 million available to us on our existing credit facilities. our net debt to total capitalization ratio was negative 1%. We purchased and canceled 673,000 shares for approximately $83 million on a year-to-date basis under our NCIB program. These purchases are mainly reflective of good capital hygiene and help to mitigate option exercise dilution. Overall, our balance sheet remains well-positioned to support operational needs and we are prepared to manage challenges related to the economic variables and business conditions. We will continue to exercise the operational financial discipline one would expect as we evaluate investment opportunities that may develop over time. Vermont targets a return on equity of 18% over a business cycle. Return on equity was lower at 19.4% compared to 24.7% for Q3 of 2023 and lower than our five-year average of 20.8%. Return on capital employed was 26.3%, down from 31.6% for Q3 of 2023. Both of these metrics were driven by lower earnings in our higher capital investment, coupled with the increase in working capital as well as our excess cash on hand. And finally, as announced yesterday, the Board of Directors approved the regular quarterly dividend of $0.48 per share payable on January 6, 2025, to shareholders on record on December 6, 2024. John, I'll turn it back to you for some more detailed comments on the results.